C O P Y IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH CENTRAL DIVISION In re: ) ) SCO GROUP, ) ) Plaintiff, ) ) v. ) Case No. 2:03-CV-294 ) INTERNATIONAL BUSINESS MACHINES, ) ) Defendant. ) __________________________________) BEFORE THE HONORABLE BROOKE C. WELLS ------------------------------------ December 5, 2003 Transcript of Motion to Compel Dawn E. Brunner-Hahn, RPR ALPHA COURT REPORTING SERVICE 120503DB P.O. BOX 510047 SALT LAKE CITY, UT 84151-0047 Phone: (801) 532-5645 Fax: (801) 595-8910 1 APPEARANCES OF COUNSEL: For the Plaintiff: HATCH, JAMES & DODGE BY: Brent O. Hatch Attorney at Law 10 West Broadway Suite 400 Salt Lake City, Utah 84101 Kevin P. McBride Attorney at Law For the Defendant: CRAVATH, SWAINE & MOORE BY: David R. Marriott Attorney at Law Worldwide Plaza 825 Eighth Avenue New York, NY 10019-7475 SNELL & WILMER, L.L.P. BY: Todd M. Shaughnessy Attorney at Law 15 West South Temple Suite 1200 Salt Lake City, Utah 84101 2 1 Salt Lake City, Utah, Friday, December 5, 2003, 10:00 a.m. 2 (Proceedings) 3 THE COURT: Good morning, ladies and gentlemen. 4 MR. MARRIOTT: Good morning, Your Honor. 5 THE COURT: Let's go forward in the matter of the 6 SCO Group versus International Business Machines 7 Corporation. The record should reflect that plaintiff SCO 8 is represented today by Mr. Brent Hatch and Mr. Kevin 9 McBride. Defendant IBM is represented at counsel table by 10 Mr. David Marriott and Mr. Todd Shaughnessy. 11 Gentlemen, let me indicate, as we begin, that I 12 have reviewed your submissions, I have reviewed what I 13 believe to be the pertinent case law in this matter and I 14 have reviewed the affidavit that was submitted by Mr. 15 Shaughnessy. And I've also taken note of the statements 16 that are included in the submissions which indicate that 17 certain representations have been made by SCO to the media. 18 Based upon my review of those items, I would tell 19 you what my intention is today so that we can then focus the 20 argument towards that particular end. As I've stated, and 21 based upon my review of those items mentioned, it would be 22 my intention to grant defendant IBM's motion to compel 23 answers as to both sets of interrogatories, and to require 24 plaintiff SCO to file responses to these interrogatories or 25 affidavits indicating that they are unable to do so and why 3 1 within 30 days of the entry of this order. I would further 2 intend on directing that IBM's responses should correct 3 those deficiencies that are set forth in the defendant's 4 addendum which was filed on 11-4 of this year, and that is 5 to include answers to Interrogatories No. 12 and 13. Now, 6 in the interim, it would also be my intention to otherwise 7 postpone all other discovery until such filings have been 8 and compliance has been achieved. 9 Let me ask counsel first, is there a protective 10 order in place? 11 MR. MARRIOTT: There is a protective order. 12 MR. MCBRIDE: Yes, Your Honor. 13 THE COURT: All right, that answers that question 14 then. All right, given that as my intended plan today, then 15 I would ask counsel to focus your arguments as to why or why 16 not I should not implement that plan. 17 MR. MCBRIDE: Would you prefer that I go first, 18 Your Honor? 19 THE COURT: Well, we -- 20 MR. MCBRIDE: Mr. Marriott's pretty much got the 21 day so far, it would appear. 22 THE COURT: It's up to you, counsel. You both 23 have matters. Maybe, Mr. McBride, it does make some sense 24 for you to go forward. 25 MR. MARRIOTT: That's acceptable, Your Honor. 4 1 THE COURT: All right. 2 MR. MCBRIDE: Thank you, Your Honor. 3 Frankly, we can appreciate the intention of the 4 Court based on the submissions and understand the basis for 5 it. We think, Your Honor, however, that in a few minutes 6 this morning we can convince you that the more appropriate 7 path is to follow a rule or an outline of the rule in Rule 8 33 that basically says that because the issues involved in 9 this discovery involve a complex interplay between facts and 10 law, that instead of granting the motion, what the Court 11 should simply do is put the motion on hold until very 12 specific discovery has been identified and produced and then 13 make a ruling. And before I address this -- yes, Your 14 Honor? 15 THE COURT: No. What I was going to say, 16 Mr. McBride, is that in reviewing all the submissions and 17 reviewing the pertinent case law, it appears to me that what 18 is happening is somewhat circular in that defendant 19 indicates that it cannot answer plaintiff's interrogatories 20 until plaintiff has identified the source codes, et cetera, 21 but the manner in which those have been submitted make it, I 22 believe, unduly burdensome on the defendants and so we go 23 'round and 'round. And I find also that it appears to me 24 that if there's any argument to be made on the failure to 25 confer under Rule 37 that -- that there has been a good 5 1 faith effort to comply, but that because we can't get off 2 the ground because of this circular problem, that I would 3 not find that a sufficient basis for, you know, further 4 postponing. 5 MR. MCBRIDE: May I have a few minutes to try to 6 convince you otherwise, Your Honor? 7 THE COURT: Absolutely. 8 MR. MCBRIDE: All right. And I simply set this 9 out at the beginning because this is what I think we can 10 convince you of in a few minutes this morning. And what I 11 think we can convince you of is that rather than entering an 12 order, what really should happen is specified discovery 13 should be identified, we should have time to take that 14 discovery, then we should revisit this and respond more 15 fully to the interrogatories submitted by IBM. Now, I would 16 like to explain why. 17 This case, Your Honor, at a very fundamental 18 level, involves infringement. Infringement is a very 19 broadly defined category in the law. It can include 20 copyright infringement, trade secrets infringement or plain 21 old confidential information that's taken without 22 permission. Those are all very differently defined areas of 23 the law that all have very differently defined rules of 24 proof. The -- what we need to get our arms around 25 collectively, on our side and on IBM's side, is a clear 6 1 definition of what source code is at issue, what source code 2 is potentially an infringement. Before we discuss whether 3 it's a trade secret or a copyright or anything else, the 4 most important thing is for both of us to come to grips with 5 the universe of source code, the documentation and methods 6 and concepts that we believe are at issue so we can argue 7 about them. And once we have an understanding of what that 8 universe is, the very complex rules -- this is a complex 9 case, Your Honor. There's going to be some of this code and 10 some of these methods that are trade secrets, and some are 11 going to be copyright and some are going to be contract 12 violations and some are going to be nothing. I submit, Your 13 Honor, that's the very first step that needs to take place 14 before we start worrying about whether there is trade secret 15 burdens met or not met. 16 Certainly, Your Honor, the cases cited by the 17 defendant in this case with respect to trade secrets and the 18 need to make some affirmative representation of what those 19 are, that makes complete sense. We have no argument with 20 that general proposition of law. What we are simply saying 21 is this case involves deeper level complexities than the 22 cases cited by the defendant. This is not the Muna case. 23 This is not a case where we're talking about identity of 24 employee records or customer records that you would normally 25 see in a trade secrets case. This involves an 7 1 interrelationship between, as I said, copyright, trademark 2 and contract law. 3 Now, Your Honor, I would like to proffer a case 4 for the Court's review that is a pretty well known case but 5 it's not in our briefs. It is Sun against Microsoft, a 6 Ninth Circuit case decided in 1999, and the reason -- would 7 it be appropriate to. . . 8 THE COURT: Certainly. 9 MR. MCBRIDE: The reason -- 10 THE COURT: Excuse me, Mr. McBride. 11 MR. MCBRIDE: Yes. 12 THE COURT: Do you have an extra copy of that? 13 MR. MCBRIDE: Oh, sorry, Your Honor. 14 THE COURT: Hand it to Mr. Willey. He's the 15 brains behind this operation. 16 MR. MCBRIDE: The reason this is an interesting 17 case is because it underscores the point that I just made to 18 the Court. The -- there are some paragraphs here worth 19 reading, but the -- and I'll get to those in just a moment. 20 The case in Sun against Microsoft involved claims of 21 misappropriation of derivative works. A derivative work is 22 a work that was licensed from one party to another party, 23 and then the other party made some improvements to it. In 24 copyright law that's a derivative work. And in the Sun 25 against Microsoft case, Sun licensed Microsoft its Java 8 1 technology, Microsoft made a bunch of changes to it, which 2 is derivative work, and then there was an argument about how 3 that should be used. 4 The reason this is an important case and an 5 interesting case is the Court goes right to the issue of -- 6 that we are -- this particular case is in the intersection 7 between contract law and copyright law that is a frontier, 8 literally, of judicial interpretation. Even for the Ninth 9 Circuit in 1999, this was deemed a case of first impression 10 insofar as identifying the interrelationship between 11 contracts and copyrights. That -- and the language in this 12 case, for example, if I could turn the Court's attention to 13 page 5. It's not 5 in the case. It's five on the printed 14 page up in the upper right-hand corner. I simply would like 15 to read a little language to underscore the points just 16 made. In the bottom left-hand corner, the Ninth Circuit, 17 upon review of the issues, says, in affect, five lines up 18 from the bottom of the page, We agree with Microsoft that 19 the issue turns upon whether the terms Microsoft allegedly 20 breached were limitations on scope of the license, which 21 would mean there is copyright infringement by acting outside 22 the scope, or whether the terms were merely separate 23 contract covenants, which would make this a contract 24 dispute. 25 Now, the Court -- the Ninth Circuit goes on, and 9 1 I'll ask the Court to kindly turn to page 6, the following 2 page, for additional highlighting. The bottom right-hand 3 corner at the very -- at the top of the sentence, the Ninth 4 Circuit continues to explain, Whether this is a copyright or 5 a contract case turns on whether the compatibility 6 provisions help define the scope of the license. 7 And one last reference I would like the Court to 8 consider, and then I'll leave this case, is further on page 9 7, bottom left-hand corner, picking up in headnote no. 8, 10 The enforcement of a copyright license raises issues that 11 lie at the intersection of copyright and contract law, an 12 area of law that is not yet well developed. We must decide 13 an issue of first impression, whether -- and the Court goes 14 on to explain what the issue of first impression is. 15 Essentially, it has to do with licensing a derivative work, 16 whether it's a copyright or contract case and what are the 17 issues that flow therefrom. 18 Now, Your Honor, we would submit that if this was 19 a case of first impression for the Ninth Circuit, it 20 underscores -- this is an undeveloped area of law that turns 21 on issues of law and fact and they're intertwined. That's 22 getting us back to the Rule 33 question that we were making. 23 I would like to give the Court a little bit of the 24 background of the licensing relationship between our parties 25 that relates to the Sun against Microsoft case. 10 1 May I move to that or does the Court have any 2 particular questions? 3 THE COURT: Certainly. Go ahead. 4 MR. MCBRIDE: Thank you. May I put up a chart 5 here? 6 THE COURT: If you can find a place to put that 7 chart up, go for it. 8 MR. MCBRIDE: I'll tell you what I have. 9 MR. WILLEY: We have an easel right here if you 10 want, sir. 11 MR. MCBRIDE: Would you mind. . . 12 THE COURT: We are spacially challenged. We just 13 do the best we can. 14 MR. MCBRIDE: Well, that's all right. 15 THE COURT: And, counsel, if you wish to move 16 around -- 17 MR. MCBRIDE: Your Honor, I have a smaller, 18 obviously -- 19 THE COURT: Nonetheless, feel free and you need 20 not ask permission to move, even up behind the bench area if 21 you wish to in order to be able to see. 22 MR. MCBRIDE: May I, Your Honor? 23 THE COURT: Yes. Certainly. 24 MR. MARRIOTT: Thank you, Your Honor. 25 MR. MCBRIDE: This case is an interesting and 11 1 important case because it involves, really, the genesis of 2 computer software for large corporations. You can judge 3 somewhat by the fact that we have a variety of people in the 4 audience here, none of whom, I believe, are affiliated with 5 either party, but are people who have general interest in 6 the area. And that really speaks to this issue, Your Honor. 7 In the beginning of the corporate software world, 8 there was AT&T. AT&T created Unix. Unix is the corporate 9 operating system of choice that all corporations use at the 10 Fortune 1000 level and significantly below that. It just 11 works better than Microsoft Windows when you have a large 12 distributed environment. So companies have used Unix for 20 13 years or more. AT&T made all this stuff. 14 Then AT&T wanted to create larger markets for it 15 and licensed Mr. Marriott's client, IBM, and a number of 16 other companies, Hewlett Packard and all those large 17 software vendors, allowing each company to create its own 18 derivative work based on top of Unix. And so, thus, we have 19 in the chart, Your Honor, in the upper left-hand side just a 20 really description that points out that IBM software product 21 that we're trying to get produced in this case and that is 22 at issue in this case is part stuff that came from AT&T and 23 part stuff that it made by itself. The derivative work is 24 stuff it made by itself. 25 Now, under the contract with IBM, and now SCO -- 12 1 actually, we have two roles in this relationship, but in the 2 particular law I'm talking about now SCO's in the shoes of 3 AT&T. We have acquired all of AT&T's rights of license and 4 copyrights relating to Unix. And so we now have a situation 5 where the contract we have with International Business 6 Machines provides the following, in the scope clause, the 7 clause that the Court in Sun against Microsoft addresses, 8 the scope clause was really the clause that identifies what 9 you can use the software for. It is the heart of the 10 intended and allowed use for the software. The scope clause 11 of our license, that is to say AT&T -- SCO's license to IBM 12 says the following: You may use this software product. You 13 may modify it. You may create derivative works based 14 thereon provided that your derivative works are treated as 15 part of the original software product. 16 Now, Your Honor, that becomes a very interesting 17 question. Is that a contract interpretation that this Court 18 will ultimately have to make? Is it a copyright issue? But 19 the bottom line is this, IBM is obligated to maintain some 20 confidentiality under some law, copyright, contract and 21 trade secrets, with respect to not just the Unix that 22 licensed -- was licensed from AT&T but also the derivative 23 work that IBM created on top of that. IBM owns the 24 derivative work. We don't contend anything to the contrary. 25 But what we do contend is that we have a license agreement 13 1 that says even though you own your derivative work, you 2 don't own Unix, you don't own the stuff we licensed to you 3 and you can't use your stuff in ways that violate our 4 license scope. And our license scope says the following: 5 You have to use it for internal business purposes only. You 6 cannot use it for the benefit of others. You can't let 7 others use it for their benefit. You can use it for 8 yourself. You can make money on it. You can license it. 9 And that's what its intended use is, but the second you step 10 outside that license scope and you use this for other 11 people, you've violated the scope of this license. That's 12 what this case is rooted in, fundamentally. That's the 13 beginning point of this case, Your Honor. 14 Now, that leads us to a very interesting point. 15 Do we have again -- and I'll only do this once more and I 16 won't repeat it after that -- do we then have a contract 17 case? Do we have trade secrets? Do we have confidential 18 information which is neither a trade secret or a copyright? 19 And if so, what proportion do those fall out or shake out in 20 and how is the Court going to deal with that? Your Honor, 21 that is precisely the interrelated issue of law and fact 22 that ought to be addressed appropriately under Rule 33 and 23 should not -- should not be allowed -- this discovery needs 24 to be framed -- in the Court's wisdom and appropriate 25 oversight, this discovery needs to be framed in a way that 14 1 allows us to identify just first what is all this stuff that 2 IBM put into Linux? And I'll explain this in just a minute. 3 We will need to identify all the -- everything that's at 4 issue before we start giving it a legal label. That's why 5 this Rule 33 ruling that we are requesting is appropriate in 6 this case. 7 Now, we go to the question of, okay, IBM licensed 8 a software. What's this -- and agreed, you know, that they 9 would keep it confidential and they wouldn't use it for 10 other people and would only use it internally. What those 11 words mean, Mr. Marriott and I or other lawyers are going to 12 be arguing about ad nauseam. That should not be the inquiry 13 today. We know -- and the reason this case got launched in 14 the first place, we know IBM gave a lot of source code, 15 development methods and sequences of source code usage into 16 Linux. Linux is a free operating system that's distributed 17 free of charge and is literally undermining, totally, the 18 entire operating system environment for Unix users in the 19 corporate world of Fortune 1000 and thereabouts. And Linux, 20 as I'm sure the Court knows from general knowledge, is 21 developed under an open source model where many people 22 contribute, many people make wonderful improvements. And, 23 again, I'm willing to guess that a number of the people in 24 the audience are probably software developers who have a 25 very intense interest in this case being decided rightly, 15 1 because there are many people who like the Linux model, like 2 participating in a community and -- a development community, 3 and that's kind of a big issue that's underlying this case. 4 We don't have issue with the non-infringement part 5 of it. This particular case has to do with IBM's 6 infringement. IBM, by its own admission -- and what I would 7 like to do, if I may, Your Honor, just so you know I'm not 8 making this stuff up, or at least I am not making it up new, 9 because there are numerous references in the complaint that 10 I think are appropriate to just generally address. 11 I'm sorry. This is my copy. If you don't mind 12 I'll trade you. 13 THE COURT: Have you got two? Give them to me, 14 please. 15 MR. MCBRIDE: Yes, Your Honor. 16 Now, where we are so far, in at least my line of 17 reasoning, is I want to walk the Court through enough of our 18 complaint to help the Court understand that IBM clearly did 19 contribute a lot of the Unix-related information into 20 Linux. We just don't know what it is. And I would refer 21 the Court, to start with, to paragraph 51 -- no. I'm 22 sorry. We are going to back track to that -- paragraph, 23 please, 95. Actually it's 96. Now, the reason I'm using 24 this complaint is we've included in the complaint news 25 articles published about IBM's contributions into Linux and 16 1 quotes attributed to IBM about its involvement into Linux. 2 So we're not guessing here. We're not making this story up 3 that IBM has put a lot of Unix information into Linux. IBM 4 had told everybody they've done that. 5 THE COURT: But isn't SCO also saddled with, for 6 lack of a better term, having made public statements itself 7 concerning this case? I mean, it's not just IBM making 8 comments about the contributions to Linux. 9 MR. MCBRIDE: Right. 10 THE COURT: Isn't it also SCO making comments 11 about trade secrets and what it would show in court? 12 MR. MCBRIDE: There is -- yes. Certainly. 13 THE COURT: I guess, Mr. McBride, my only concern 14 about this is I acknowledge that this is here, but I want to 15 focus you back on to the question of whether or not motions 16 to compel should be granted. 17 MR. MCBRIDE: Well, if the Court wouldn't mind, 18 I'll try to hurry up my chain of reasoning here that I think 19 gets me to where I think the appropriate ruling is and I'll 20 try to do it more quickly. If I might, just very briefly, 21 in paragraph 96, there's a quote here attributed to an IBM 22 executive that for the purposes of this hearing certainly is 23 sufficient for discovery to go forward on the issue, that 24 IBM admits -- and I've grown a little older since I was last 25 looking at this and need my glasses. 17 1 THE COURT: I understand. 2 MR. MCBRIDE: In the bold in paragraph 96, it 3 simply says, While they admit Linux has a long way to go 4 before it can compete with the functions available on many 5 flavors of Unix -- 6 (Whereupon, the reporter asked Mr. McBride to slow 7 down.) 8 MR. MCBRIDE: I'm sorry. While they admit Unix 9 still has a way to go before it can compete with the 10 functions available on many flavors of Unix, IBM officials 11 said Linux can prove more cost effective. 12 And the next paragraph says, We are happy and 13 comfortable that Linux can become the successor, not just 14 for AIX but for all Unix operating systems. 15 Now, there's only one last quote I would like to 16 refer to and that's in paragraph 97, Your Honor. The quote 17 was attributed to a senior executive vice-president, 18 Mr. Steven Mills at IBM, who in the bold stated in January 19 2003, IBM will exploit its expertise in AIX to bring Linux 20 up to par with Unix. 21 Then continuing in the bold only, Mills 22 acknowledged Linux lags behind Unix in scalability, SMP 23 support, failover capabilities and reliability but not for 24 long. The pathway to get there is an eight-lane highway, 25 Mills said, noting that IBM's deep experience with AIX and 18 1 its 250-member open source development team will be applied 2 to make the Linux kernel as strong as that of Unix. The 3 road to get there is well understood. 4 Now, SCO has made public statements about Unix and 5 I'm not suggesting we want a moratorium on all of these 6 interrogatories. And perhaps what I should do is address it 7 in much more specificity right now. The things that we have 8 said, or that our executives have said, or quotes attributed 9 to our executives, we have to live with just the way IBM 10 does, and we're happy and willing to do that. But I 11 believe, Your Honor, those issues are most appropriately 12 included in Interrogatories No. 12 and 13, and if I read 13 them correctly, where in Interrogatory 12 IBM requests all 14 of the contributions made by other people, not IBM, into 15 Linux. And in paragraph 13 -- in Interrogatory 13 IBM 16 requests -- and I'm sorry. I may not be saying it precisely 17 right. But IBM wants the universe of all contributions made 18 to Linux inappropriately that we allege and then wants us to 19 specify which of those are attributed to IBM, and I think 20 that's a fair characterization of Interrogatories 12 and 13. 21 And, Your Honor, if you want us to answer those, 22 Interrogatory No. 12, and that appears to be a fair thing to 23 do, we'll do that. We'll do that. It, to us, appears that 24 it's not part of this case, but if in fairness of putting 25 everything in front of this Court, we'll certainly do that. 19 1 I'm more focused on Interrogatories No. 1, 2 and 4 2 that IBM has submitted to us, because those go to the heart 3 of my arguments over here. We need, Your Honor, to have 4 Mr. Marriott produce all versions of AIX. We need them to 5 produce all the development notes of their developers from 6 AIX. Then we will have the capability of being able to 7 compare what IBM's contributions are lined up against our 8 codes, and then we'll make a very clear specification of 9 where the violations are, and then we'll end up at that 10 point arguing about what kind of violations they are. This 11 becomes really important because of, we're back to now legal 12 definitions, the Copyright Act allows companies or any 13 copyright holder to copyright expressions that are written 14 down on paper, expressions, including in the computer 15 software world sequences, structure and organization. The 16 Copyright Act does not allow anyone to copy a method or an 17 idea or a concept. That's specifically outside the realm of 18 copyright law. 19 Well, back to the beginning, Your Honor, AT&T 20 recognized this, and in the Unix agreement that was licensed 21 to everybody else, although IBM has its own deal a little 22 different, but Sequent has the standard agreement, IBM made 23 every company hold methods and concepts as confidential 24 information, recognizing that that was not protectable by 25 copyright law, but they wanted to make sure they had it in 20 1 the contract law. So what I'm saying, Your Honor, is if IBM 2 will produce and answer our discovery, staying the discovery 3 I think will do tremendous injustice. It really gives IBM 4 an advantage to strategically pursue motions that would be 5 dispositive without a full vetting of our ability to be able 6 to then explain to the Court what's what and why. 7 Now, Your Honor, let's take the area of 8 confidential information, and I'll explain to you why I 9 think that is the case. 10 THE COURT: Before we do that, Mr. McBride, you 11 know, tell me why the rulings in the cases of Utah Medical 12 Products, decided, you know, from this District Court and 13 the Leucadia versus Applied Extrusion Technologies case, 14 decided out of the District of Delaware, should not apply to 15 this circumstance which indicates that the burden is on the 16 plaintiff to prove the existence of the trade secrets 17 assuming that that's part of it, all right, and that it is 18 appropriate to postpone discovery in those circumstances 19 until such time as the plaintiffs have acknowledged what the 20 trade secrets may be, and otherwise this Court cannot 21 determine, as the other party cannot determine, what is 22 relevant as to future discovery. 23 MR. MCBRIDE: Thank you. Yes. I will, Your 24 Honor. 25 THE COURT: None of us know. 21 1 MR. MCBRIDE: Right. And future discovery is up 2 in the air because it's in one of the three categories. The 3 Medical Products case that Your Honor is referring to, in my 4 reference, was a summary judgment case, not at the beginning 5 of the case but at the end of the case. The Leucadia case 6 the Court is referencing, specifically I would call the 7 Court's attention to, says that trade secrets do not embody 8 a Rule 9 kind of specificity requirement. It is, in fact, 9 notice pleading required under trade secrets law. That's 10 what the Leucadia Court said. So I'm saying there's give 11 and take in both of those cases because neither of those 12 cases addresses our specific facts. The facts of our case 13 go deeper than both those cases, number one, and, number 14 two, both of those cases were decided at a different moment 15 in the case than ours. And what I believe is a very correct 16 statement, Your Honor, is we won't know what part is trade 17 secrets, what part is contract, what part is copyright until 18 we've seen all of IBM's contributions. And I can explain 19 why, unless you want to stop on that for a minute. 20 THE COURT: No. Go ahead. 21 MR. MCBRIDE: The reasons why, Your Honor, 22 remember the explanation I gave about IBM's preparation of 23 its derivative works. IBM owns those derivative works. We 24 don't dispute that. Not for a second. What we argue is 25 they can't give them away, the contract -- the terms of the 22 1 contract, and that's a decision that at some point summary 2 judgment will be brought on to interpret. No question about 3 it. And we are simply saying, Your Honor, because IBM only 4 was involved in preparing that derivative work and we 5 weren't, we don't know what they've prepared. And part of 6 what they've prepared is going to be confidential 7 information, mandated to be kept secret under the license 8 agreement and a breach of the scope clause, according to us, 9 but we don't know what they've done with the derivative work 10 so we can't point out what we don't know. 11 Now, I'll go to the trade secrets, but you can 12 talk if you have anything on that. I'll go to trade secrets 13 specifically because that's a different set of facts. 14 THE COURT: No. Go ahead. 15 MR. MCBRIDE: The cases the Court is referring to, 16 and the cases that IBM cite, aren't trade secret cases. 17 That is the thrust of that case. I'm saying our case is 18 more -- it's an infringement case that may be one of three 19 different. And by the way, Your Honor, I will proffer to 20 the Court that we are filing a second amended complaint that 21 has copyright infringement claims, and will be filed within 22 the coming few days or no less than a week. And we'll put 23 then fully in front of the Court the three buckets we have 24 outlined here, contract, trade secrets and copyright. But I 25 would like to the address trade secrets for a minute and 23 1 explain to you what is the genesis of our trade secrets 2 claim. And at that point, I think most of my argument is 3 going to come back to some sort of a summary. 4 THE COURT: Let's do that because we need to be 5 finished by -- 6 MR. MCBRIDE: All right. 7 THE COURT: -- before 12. 8 MR. MCBRIDE: All right. 9 THE COURT: Giving all parties ample time to 10 argue. 11 MR. MCBRIDE: If -- I'm going to use just as an 12 aid, again, the complaint, because this helps set out the 13 issues. In paragraphs 50 -- starts at 51. Now, what I'm 14 about to refer to here really is only information addressing 15 the trade secret -- well, I guess that's not even true. 16 This addresses all the areas, but it really does 17 go to the heart of trade secrets, and, I believe, explains 18 why the Court should rule according to the way I'm 19 requesting as opposed to entering a motion that Mr. Marriott 20 is requesting. Paragraph 51 through paragraph 57 -- and I 21 will just generally characterize those for the Court. This 22 explains a background information that goes to the heart of 23 our trade secrets claim. And if we have not done a good job 24 of articulating that, then I guess shame on us and we better 25 do it better. But our trade secrets claim really is 24 1 embodied in and arises out of the joint development 2 agreement between our two companies that started in the 1997 3 time frame. 4 Now, Your Honor, IBM, as I mentioned, prepared its 5 derivative work of Unix that it calls AIX, but SCO also 6 prepared its own derivative work of Unix that it calls 7 Unixware. And so we have two distinct positions in this 8 case, number one, we're in the shoes of AT&T as the original 9 licensor, but, number two, we were a licensee of AT&T. We 10 prepared a version of Unix which was designed to run on 11 Intel-based machines, which is the kind of stuff that is in 12 pretty much all of our offices are Intel-based processors, 13 the cheap processors that make our computers much more 14 inexpensive to run. Intel processors are compared to what 15 are called RISC, R-I-S-C, processors, which are much more 16 expensive and those are the processors used by large 17 corporations and they pay a lot more money for them. 18 SCO, in the early days, carved out a little niche 19 in the Unix world that it would develop a version of Unix 20 only for Intel processors. Nobody else wanted that space 21 because Intel's processing power wasn't very good back 22 then. But Intel's processing power got better and better, 23 and lo and behold, in about 1995, SCO found itself in a 24 really great position. Intel was now being -- Intel chips 25 were now becoming powerful enough that corporations actually 25 1 wanted to use them for large functions. And here we were at 2 SCO, lo and behold, the only company that had an operating 3 system running on Intel. And so, Your Honor, the SCO 4 Company, as it delineated in paragraph 51, from and after 5 September 1995 spent a lot of money, for us. I've heard the 6 numbers 30 to 50 million, and I can't remember which, so I 7 better not represent too much. But for a small company, 8 this company spent a lot of money in making sure that its 9 version of Unix would run very, very well on Intel-based 10 machines. IBM had none of that information, none 11 whatsoever. 12 The other thing that our little company did was to 13 make our version, SCO's version, of Unix called Unixware, 14 run on 64-bit Intel processors. Now, the stuff we all use 15 right now is a 32-bit Intel processor, and that's really not 16 that complicated a thing. It's just that if you envision a 17 pipe that water flows through, or in the computer world bits 18 flow through, a bit that our computers all use -- or, excuse 19 me, the processor, the Intel processors, that our computers 20 all use, can process 32 bits of data at a time. And so it 21 stands to reason that if you have a 64-bit processor, you 22 just have twice as wide a pipe through which water can flow 23 and you can do stuff a lot faster. 24 Our little company in 1997 and 1998 had spent 18 25 months, as outlined in our allegations in the complaint, 26 1 developing the technology for 64-bit Unix processing on 2 Intel. IBM had none of that technology. IBM had no ability 3 to convert anything from its operating system onto an 4 Intel-based machine. They had no available technology. 5 They couldn't do it. And yet Intel processors were becoming 6 the thing every company wanted to run their systems on. So 7 IBM was being left out in the cold without an operating 8 system that they could sell. 9 Well, in traditional IBM fashion, they came to us 10 and asked us to partner, because that's what they do with 11 companies, they partner and that makes a lot of sense. But 12 in the process of this partnership, things went awry. We 13 gave IBM all of our knowledge that we had spent 16 months 14 developing about how to run Unix on Intel processors. We 15 had that. That's trade secret stuff. IBM didn't have any 16 of that. We gave it all to them in the joint development 17 project. And at the same time, IBM is developing Linux 18 without telling us. So we sail along. We give them all 19 this trade secret information. This is the core of our 20 trade secrets case, the joint development agreement between 21 the companies that started in the 1997 time frame called 22 Project Monterey. We gave them more knowledge than they had 23 as a company about how to run Unix on Intel processors. 24 They needed that. They took that from us. They then went 25 and said, Thank you very much. We decided not to do the 27 1 joint development project. Have a nice life. Took all of 2 our technology and gave it to Linux. IBM now is marketing 3 this great new Linux product, that 64-bit Linux, and it's 4 the greatest thing ever. They got that from us. That's a 5 heart -- that's at the heart of our trade secrets violation. 6 That's in the complaint and, again, we're back to the 7 problem that, technically, we've already produced it, Your 8 Honor, because we gave them the source code of Unixwork so 9 it's in there. 10 THE COURT: Didn't you give it to them in hundreds 11 of thousands of pieces of paper, though, without 12 specifically identifying it? 13 MR. MCBRIDE: I'm quite certain we fixed all that. 14 If we haven't, we'll do it in sooner than 30 days. And, 15 Mr. Marriott, do you know? Have we not given that to you in 16 machine readable format? 17 MR. MARRIOTT: I'm not sure that was Your Honor's 18 question. The question, Your Honor, is has the SCO Group 19 identified the specific trade secrets they say we've stolen 20 and dumped into the open source? The answer is absolutely 21 not and I'll address that when I have the opportunity. 22 MR. MCBRIDE: That is correct. We haven't 23 specific -- I admit that. There's no question we haven't 24 done that. And I'll tell you why and then I'll sit down and 25 let Mr. Marriott have his say. 28 1 We're saying this is sufficient for the Court to 2 assume or view that trade secrets are involved in this case. 3 But the trade secrets are so interrelated with the other 4 code you can't separate out one. You can't do it. You have 5 to have the discovery of the universe, then we can argue 6 about where the code falls in what bucket. That's the way 7 to proceed in this case, we believe, Your Honor, and that's 8 why a ruling under -- and I'll finish this by reading it and 9 then I'll sit down. What we are asking the Court to do is 10 under Rule 33(b) -- I'm sorry. It's at the end of Rule 11 32(c), it simply says, An interrogatory that relates to 12 facts or applications of law or fact, the Court may order 13 that such an interrogatory need not be answered until after 14 designation of discovery has been completed or until 15 pretrial conference. The reason for this ruling is really 16 explained in the -- or this rule is explained in the 17 advisory committee notes on the following page, that since 18 -- it says very practically, Since interrogatories 19 involving mixed questions of law and fact may create 20 disputes between the parties which are best resolved after 21 much or all of the other discovery has been completed, the 22 Court is expressly authorized to defer an answer. We're 23 asking the Court to defer an answer until we have had enough 24 discovery to be able to say what is what in the trade 25 secret, confidential information, copyright arena and then 29 1 we'll fully answer and live with whatever the answer is. 2 And that relates to, really, Interrogatories 1, 2 and 4. 3 Interrogatories 12 and 13, Your Honor, we'll answer those as 4 best as we can, if that's what the Court wants us to do. 5 THE COURT: Thank you, Mr. McBride. 6 MR. MCBRIDE: Thank you, Your Honor. 7 Excuse me, Dave, you don't need this, do you? 8 MR. MARRIOTT: No. It's all yours. 9 Good morning, Your Honor. 10 THE COURT: Good morning. 11 MR. MARRIOTT: We appreciate the direction that 12 Your Honor has given us, and let me, if I may, in the few 13 moments that I have do three things. First, Your Honor, let 14 me say just a little bit, because I think it's helpful to 15 the Court and important to the issues, about operating 16 systems and source codes. Those are sort of fundamental to 17 what we're talking about on these motions. Second, let me 18 tell you what is at issue and that I think what you have 19 tentatively ruled is exactly the right ruling. And, three, 20 let me describe for you just briefly some of the 21 shortcomings of the responses we have received from the SCO 22 Group. I won't take you through all the detail but I would 23 like to describe at least some of them. 24 If I may approach, Your Honor, we have a couple of 25 exhibits, like the SCO Group, that I think may facilitate 30 1 the discussion. 2 THE COURT: Thank you. 3 MR. MARRIOTT: All right. So, first, Your Honor, 4 by way of a little background, it is important, I think, to 5 understand the issues presented here to understand a little 6 bit about operating systems. And if you'll take a look at 7 page 1 of our book, you'll see a little table which 8 undertakes to describe that. Without its software, Your 9 Honor, a computer is essentially a useless lump of metal. 10 With its software, however, an operating system can do a lot 11 of important things. 12 There are basically two types of programs. There 13 are systems programs and there are application programs. 14 The most important of the systems programs is the operating 15 system. And it's the program which controls the functioning 16 and the operation of the hardware itself. It controls the 17 resources of the machine, and it is the base on which the 18 applications sit. So when Your Honor sits down at her desk 19 and when you write a letter, you communicate with the 20 hardware via the operating system. You might use a program 21 like Microsoft Word or Word Perfect to write the letter. 22 Those are applications which sit on top of the operating 23 system. 24 Computer programs, Your Honor, and operating 25 systems are written in a language called source code. 31 1 Source code is a set of statements with comments that 2 represent the instructions that are ultimately translated by 3 a device called the compiler into ones and zeroes that the 4 computer executes. And if you take a look at pages 2 5 through 9 in this book, what you'll see, Your Honor, is a 6 sample of source code. In fact, this is source code from a 7 particular file in the 2.5.69 version of the Linux operating 8 system. What you'll see in red are the comments, 9 programer's notes, and what you'll see in black are the set 10 of programming statements which are actually ultimately 11 translated into ones and zeroes that can be executed by the 12 machine. Essentially, Your Honor, the programer writes the 13 language and saves it to a file. The file is like the 14 chapter in a much larger book of source code. This is one 15 little chapter in a much larger book of source code. 16 Unix is a family of operating systems. It was 17 developed originally by AT&T. Linux also is an operating 18 system. Linux was pioneered in 1991 by an undergraduate 19 student at the University of Helsinki by the name of Linus 20 Torvalds. He posted a note on the internet saying, I'm 21 writing an operating system, and solicited help. What has 22 followed, Your Honor, is a massive collaborative exercise by 23 which thousands of developers worldwide have written this 24 operating system. And if you take a look at page 10 of the 25 exhibits, Your Honor, you'll see a brief diagram which 32 1 describes the process by which the Linux operating system is 2 developed. Developers worldwide make contributions. They 3 make the contributions to expert developers known as 4 subsystem maintainers. Those individuals review -- subject 5 the code to a massive process of peer review. Thousands of 6 developers have input, and when the subsystem maintainers 7 are satisfied that the code is in an acceptable form, it's 8 passed up the hierarchy to Mr. Torvalds himself and another 9 developer by the name of Andrew Morton. Those individuals 10 then make judgments about what should be in the production 11 version of Linux and what should be in the development 12 version of Linux and eventually it gets to the market place. 13 What Your Honor needs to understand here is that 14 whereas many operating systems are developed behind closed 15 doors and the source code is secret, with respect to the 16 Linux source code, it has been developed publicly. It is, 17 essentially, Your Honor, developed on the internet. Your 18 Honor can log on to any number of web-sites at which you 19 will see the Linux operating system being written before 20 you. We have included, as the next exhibit in the book, 21 Your Honor, at page 11, an e-mail that was sent from a 22 developer of the SCO Group to the mailing list by which 23 contributions are made to Linux. This is the way the 24 operating system is built. Individuals make -- write 25 codes. They suggest it for inclusion in the Linux operating 33 1 system. It's passed through a rigorous process of peer 2 review, all public, Your Honor. And as a result of this 3 process, if the contribution is deemed acceptable, it's 4 included into the operating system right before everyone's 5 eyes. 6 What you ought to know here as well, Your Honor, 7 is that the plaintiff here began in 1994 as a Linux 8 distributor and has, over the course of the approximately 9 last 10 years, distributed thousands of Linux products. 10 Now, having said that, let me tell you the second thing I 11 want to make sure you understand, which is what really, I 12 think, is at issue in this case. The crux of SCO's case, 13 Your Honor, is set up at paragraph 101 of their complaint. 14 And we've replicated it here in the book. What they say at 15 paragraph 101 is the following: They say IBM is 16 affirmatively taking steps to destroy all value of Unix by 17 improperly extracting and using the confidential and 18 proprietary information it acquired from Unix and dumping 19 that information into the open source community. That is 20 the case in its essence, Your Honor. They say we took 21 something out of a Unix book over here, a secret Unix book, 22 and we dumped it over here into the Linux public book. 23 And if I may, Your Honor, approach, what I'm 24 handing you is a collection of source code. 25 MR. MCBRIDE: Is this AIX you're finally producing 34 1 us? 2 MR. MARRIOTT: Let me tell you what you have here, 3 Your Honor. You have two books. The little book, which is 4 highly confidential under the terms of the protective order 5 in the case, is Unix source code. This is the -- this is an 6 example of the secret book that we are alleged to have taken 7 parts of and dumped into the open source community. The 8 other file that you have, the larger book, is a single file, 9 a single file of thousands of Unix source code. What we're 10 said to have done is to have taken something out of this 11 little skinny book and dumped it into this book right here. 12 That's the essence of this case. 13 Now, we asked the SCO Group in discovery, Your 14 Honor, to tell us very simply what it was, specifically, 15 that we took out of this book and that we dumped into this 16 book. We asked them the basics of their case. We asked 17 them for the evidence that they have that we've done what 18 they allege in their complaint that we've done. Now, SCO 19 objected to the requests. They said that we didn't need to 20 know what they took from here and what we put into here 21 because we did it, after all, we should know. That's the 22 first objection. Then they say to us, You don't need to 23 know, IBM, because we are going to produce to you millions 24 of pages of paper and you can figure out for yourself where 25 in those millions of pages of paper what it is you 35 1 supposedly took from here and supposedly put into here is 2 found. They tell us that we took methods, Your Honor. They 3 tell us that we took trade secrets from here, but they won't 4 tell us precisely where they are. We get that response 5 despite the fact that in order to file its complaint they 6 had to have the evidence they allege to have. We get that 7 response despite the fact that the case law is abundantly 8 clear that the order of things is that a plaintiff first 9 tell the defendant what the trade secret at issue is, and 10 then the defendant provides the discovery. 11 If Your Honor takes a look at page 13 of the book, 12 we summarize here the upshot, essentially, of the case law 13 and the rules, which is that you may not dump on a party 14 undifferentiated documents and expect them to find from 15 those documents the answers. And at paragraph -- at page 14 16 you see some of the cases, Your Honor, which address the 17 question of what the proper order of proceedings is here. 18 In the Porous case, Your Honor, for example, which case 19 concerned canisters, the Court there granted a motion to 20 compel specificity in answers. The Court said that failure 21 to identify trade secrets with sufficient specificity 22 renders the Court -- and that was what the Court was 23 referring to earlier -- powerless to enforce any trade 24 secret claim. The same is true in the Lynchval case, and 25 the same is true in the Xerox case. The Court in the Xerox 36 1 case, Your Honor, said the defendant is entitled to know the 2 basis for the plaintiff's charges against it. The burden's 3 on the plaintiff to specify the charges. It's not on the 4 defendant to guess what they are. 5 Now, we move to compel, Your Honor, after trying 6 unsuccessfully for four months to get answers to our 7 questions. Following our motion, we received supplemental 8 responses. Those supplemental responses respectfully give 9 the impression of compliance. They are in no way compliant 10 with what it is we requested. I am going to lay that out 11 for Your Honor here momentarily. Basically what SCO says, 12 Your Honor, is that in this giant haystack of code over 13 here, there are some trade secrets which we took and we 14 dumped over here, but they won't tell us where in this 15 haystack it is, and they won't show us where in this 16 haystack that it's found. 17 If you take a look, Your Honor, at page 15 of the 18 book, now, what you need to know is a little bit about the 19 size of the haystack and how small the needles are. And at 20 the risk of mixing my metaphors, let me go back to the book 21 metaphor. In this Unix book, Your Honor, this is actually 22 not the Unix book. This is just a chapter in the book. 23 Unix System 5, which is the set of code which they say is at 24 issue in this case, consists of multiple releases and 25 multiple sub-release. Release 4.2, release 3.2, release 37 1 4.0, those books of codes are immense. Each of those books, 2 Your Honor, consists of many chapters. It's not just one 3 chapter here we're talking about. Unix 4.0, for example, 4 has 14,548 chapters. This is a chapter. This isn't the 5 book. 14,548 chapters, files in these releases. Within, 6 Your Honor, the files in a given release, there are millions 7 of lines of source code. If you look here, Your Honor, you 8 will see a number on the left margin of the code. In this 9 particular file, there are 11,891 lines of code, in one of 10 the files, in one of the chapters of which there are 14,548 11 in just one release, just one release of Unix. 12 The same, Your Honor, is true with respect to 13 Linux, and, indeed, there are actually many more books of 14 Linux than there are books of Unix. Linux has multiple 15 versions. There is version 2.5, there's version 2.4. 16 Within each of those versions there are multiple releases. 17 Versus 2.5, for example, has 76 different releases, from 18 2.5.0 to 2.5.75. In other words, the book is enormous. 19 Within those books, Your Honor, in Linux, just as in Unix, 20 there are multiple chapters. Each release includes a large 21 number of files. If you look only at 2.5.69, Your Honor, 22 there are 14,086 files. This is one of the files. This is 23 one chapter in this immense Linux book which has been 24 written effectively over the internet into which we're 25 supposed to have dumped code that they won't identify for 38 1 us. In these files, Your Honor, collectively, there are 2 millions and millions and millions of lines of code. This 3 is one chapter in the book. In this chapter, Your Honor, 4 there are 31,597 lines of code. Where is the secret? Is it 5 line 17,656? What is it about it that's secret? That's what 6 our discovery requests, Your Honor, are all about. 7 Now, what makes SCO's responses here -- let me say 8 this, what do we have from SCO by way of responses? We asked 9 them to tell us where over here, Your Honor, lies the 10 material that we put into Linux. There are many books, all 11 right. They have identified for us not a single Unix book, 12 not a single book. There are thousands of chapters of Unix 13 from which we're supposed to have taken things. They 14 haven't identified for us a single Unix chapter, not a 15 single one. There are millions of lines of code. We've 16 asked for them. They haven't identified a single Unix code 17 -- piece of code that we're supposed to have taken from here 18 and put over here. With respect to Linux, they have not 19 told us in which -- from which -- into which Linux book we 20 are supposed to have taken this Unix material and placed 21 their secrets. We don't know what book it is though there 22 are hundreds of books at issue. 23 As to the chapters, they told us, finally, Your 24 Honor, in their supplemental responses that there are 591 25 Linux files, Linux chapters, into which we can find some 39 1 secret, which they won't identify, which comes from over 2 here, which secret they've took and they put over here in 3 591 files. Now, 591 files, the 591 they've identified, Your 4 Honor, aren't associated with any book, so we don't know 5 into which of the more than a hundred books or potential at 6 issue those 591 files reside. And even if we did, even if 7 we knew that it was 2.5.69, Your Honor, even if we knew 8 that, there are 335,000 lines of code in the files they've 9 identified. They haven't identified for us a single line of 10 code. Worse still, Your Honor, what they say in their 11 supplemental responses is, We may or may not have trade 12 secrets in those files. Figure it out for yourself. If you 13 read their supplemental responses carefully, they don't say, 14 These are our trade secrets and I swear under oath that 15 those are trade secrets. What they say is, They might be in 16 there. We'll let you know later whether they are or whether 17 they aren't in there. That is not, Your Honor, I submit, 18 what it is the rules here require of a plaintiff in a case 19 of this kind. 20 Now, what makes SCO's approach to discovery here 21 particularly troubling is that from the beginning of the 22 case they have touted far and wide their evidence against 23 IBM, the strength of their case. And I refer the Court, 24 just by way of example, to pages 16 and 17. The additional 25 book I've just given Your Honor is back up for these 40 1 statements and for more statements. Let me just focus you 2 on the four that are included here in this exhibit. The CEO 3 of the SCO Group, Mr. McBride's brother, who's in the 4 courtroom today, has said, Your Honor, far and wide, there 5 is line by line code in Linux that is matching up to our 6 Unixware code. In other words, We got you. We found the 7 code in here. It matches up to the code in here, but we're 8 not going to tell you what it is. He says, We feel very 9 good about the evidence that's going to show up in court. 10 We'll be happy to show the evidence at the appropriate time. 11 The appropriate time, Your Honor, was four months ago when 12 they received our responses which were submitted to them in 13 June. It's now been five months. 14 If you look at the next bullet point, IBM has 15 donated some of their high-end technologies into open 16 source. We have examples of code being lifted verbatim. 17 Not just a line or two, it's an entire section and in some 18 cases an entire program. Where is the code, Your Honor? We 19 haven't seen it. It's not in their discovery responses. 20 The next bullet, Portions of derivative works of 21 Unix System 5 code are found in Linux. We have begun the 22 process of showing parts of the violating code to 23 appropriate parties under nondisclosure agreements. That's 24 June 6th. That's before we served our discovery responses. 25 We haven't seen that code, Your Honor. We shouldn't have to 41 1 have a non -- we have a protective order in this case. We 2 ought to be able to have at least access to what it is 3 everybody else is supposedly seeing. 4 If you look at the last bullet point, Your Honor, 5 The month of June is show and tell time. We're not going to 6 show just two lines of code. We're going to show hundreds 7 of lines of code and that's just the tip of the iceberg. 8 Take a look, if you would, please, Your Honor, 9 back at page 14 of our book, alleged misappropriated trade 10 secrets or confidential information must, under the case 11 law, be specified. The Lynchval case concerned computer 12 programs. The Court there affirmed a decision of the 13 magistrate judge to strike an expert report because the 14 plaintiff in the case had failed to adequately disclose the 15 trade secrets. The trade secrets there are disclosed with 16 more particularity than are the trade secrets here. The 17 plaintiff in that case said to the defendant, There are four 18 documents. In those four documents there are 40 functions 19 of the computer. Nineteen of those 40 are ours. Figure it 20 out yourself. The Court in this case said that's 21 unacceptable. By comparison here, Your Honor, we've been 22 given haystacks of millions of lines of code and been told 23 to figure it out for ourselves. We know, after all, they 24 say, we're the bad guy. We supposedly dumped their Unix 25 property into Linux. But they won't tell us what it is. 42 1 Notably, Your Honor, notwithstanding the case 2 cited by Mr. McBride, the SCO Group has not cited a single 3 case to contradict these cases. The case to which 4 Mr. McBride refers from the Ninth Circuit does not 5 contradict these principals. Indeed, it's a copyright case, 6 which at present at least is entirely irrelevant to the SCO 7 Group's claims against IBM that they've asserted no 8 copyright claim, and even when they do, as they're now 9 apparently going to do, the copyright law has absolutely no 10 bearing, Your Honor, on whether or not they are required to 11 tell us what the supposed trade secret here is. 12 Now, why does this matter so much to IBM? Putting 13 aside the fact that we need to know what it is that we 14 supposedly did so that we can defend ourselves, the SCO 15 Group's activities are not limited, Your Honor, to telling 16 the world how great their case is. They are threatening 17 Linux users with lawsuits. It's like they're standing 18 outside the Barnes and Noble, Your Honor, and a customer 19 walks out having purchased a new Linux book, and the SCO 20 Group says, Wait a minute. Stop right there. That Linux 21 book includes our Unix property. You pay us or we're going 22 to sue you, and if you have a problem with it, go talk to 23 IBM. They know what they did. They took the secrets out of 24 Unix and they stuck them into Linux. Take it up with them. 25 We showed them what the evidence is. 43 1 Your Honor, they haven't showed us what the 2 evidence is. That's what these motions are about. Your 3 tentative ruling, I think, is right on the mark and we would 4 urge you to endorse it as your final ruling. 5 I don't contemplate, Your Honor, walking through 6 the shortcomings of each of SCO's requests. I think they're 7 laid out adequately in our briefs. Let me say simply this, 8 according to SCO's CEO, in a November 12th television 9 interview with KSL, This is, he says, the biggest issue in 10 the computer industry in decades. The balance of the 11 software industry is hanging on this. This, Your Honor, is, 12 as you can read for yourself, one of many statements made by 13 this company about its great evidence against IBM, and yet 14 it refuses to give us the evidence on which it's based its 15 present business model. Some of the responses give the 16 impression of providing specificity. In fact, they don't 17 provide any. The rules don't permit this approach to 18 discovery, Your Honor, and it is particularly troubling to 19 us, since SCO's CEO has publicly stated that he's glad to 20 see the case drag on since, in his view, delay merely 21 increases the SCO Group's damages against IBM. 22 It is undisputed that we're entitled to the 23 information that we've requested here. SCO hasn't even 24 argued otherwise, Your Honor. The only question on these 25 motions is whether they've given us what we've asked for, 44 1 and the answer to that is they have not. And I would 2 submit, Your Honor, that no reasonable person could 3 conclude, in view of our requests and their responses, that 4 they've given us what we've asked for. We think their 5 allegations are meritless. We don't believe they had any 6 evidence at the time they filed this case, and we don't 7 think they have any evidence now. And we submit we're 8 entitled to hear from them what it is they think they have 9 that IBM has done. If they're not required, Your Honor, now 10 to provide the answers to these questions, then we're going 11 to be in the dark as to what the case is about, we're not 12 going to be in a position to defend ourselves and we're not 13 going to advance this case to a just and a prompt 14 resolution. 15 THE COURT: I understand your position. 16 MR. MARRIOTT: Thank you, Your Honor. 17 THE COURT: Thank you for you comments. 18 Mr. McBride, I'll give you 10 minutes. 19 MR. MCBRIDE: Thank you, Your Honor. 20 I think my rebuttal is going to be a best effort 21 in open court to answer the questions posed by Mr. Marriott 22 at the broad level, and I believe that if I do this at the 23 broad level, I think that the requests that we are seeking 24 of fact and the methods that we are seeking is going to come 25 clear and that that should be the basis for the Court's 45 1 ruling. 2 There is no trade secret in Unix system files. 3 That is on the record. No problem with that. There are 4 trade secrets from Unixware, which is SCO's version of Unix 5 that was given to IBM in the joint development project. 6 Now, this may not be as much detail as we all need to get 7 into, but I'll clearly say that System 5 is in the book that 8 Mr. Marriott referred to and properly so. There's nothing 9 secret in there. There may be copyrighted code in there and 10 we assert that there is, but that's not trade secret. Their 11 trade secrets are in Unixware that emanate from the joint 12 development project. And as we move forward in discovery, 13 we should focus our efforts on the trade secret claims 14 relating to that joint activity between our companies that 15 started in 1997 and ended abruptly in 2000. 16 Now, confidential information, Your Honor, is a 17 very different animal. Confidential information is not 18 treated as a trade secret, necessarily, under the law. We 19 have a unique case here. The confidential information we're 20 talking about is stuff that Mr. Marriott's client created 21 but we didn't ever get to see. 22 THE COURT: The protective order addresses that. 23 There's a protective order in place. 24 MR. MCBRIDE: No, Your Honor, excuse me. The 25 confidential information is in the derivative works prepared 46 1 by Mr. Marriott's client that we hope to receive under the 2 -- under the -- our discovery requests but we haven't seen 3 one word of yet. We hope to see that. And once we see AIX 4 and all versions of it, then we will be in a position to be 5 able to say, Huh, you know what? This stuff you did in 6 derivative works, you own it, but you contributed to Linux 7 improperly, and, therefore, we have a claim in state law 8 contract for breach of confidential information, which is 9 completely separate from trade secrets. So it's just really 10 important that we get a scalpel here and understand what we 11 are looking for. Trade secrets, nothing in Unix System 5 12 that exists in Unixware with respect to the joint 13 development project. Confidential information emanates from 14 IBM's own development of AIX that we never got to see, but 15 we, nevertheless, have the contractual right to control the 16 use of in very limited instances, which is involved in this 17 particular case. So, hopefully that clarifies, and maybe 18 even for Mr. Marriott's arguments, if we haven't done a 19 good job of putting that information to him. 20 Now, if -- we're spending a few more minutes on 21 public statements made by our executives. And, Your Honor, 22 there are other companies that have contributed code to 23 Linux, the biggest one of which is Silicon Graphics. 24 Silicon Graphics Company has taken direct lines of Unix 25 System 5 code, not a derivative work code, Unix System 5 and 47 1 distributed it to Linux. I'll represent to the Court in 2 just broad terms that SGI has, at some level, acknowledged 3 that occurred. I won't characterize SGI's own writing, but, 4 in fact, wrote an open letter acknowledging, at some level, 5 that that occurred. 6 The evidence that our executives have talked about 7 in the public has had to do with Unix System 5 code 8 contributed by Silicon Graphics. Has nothing to do with 9 IBM. Now, the evidence against IBM that our executives have 10 talked about, Your Honor, that we know IBM has contributed 11 into Linux, specifically, and we've talked about this, 12 relate to the code that came from Dynix, that is the NUMA 13 code and the RCU code. IBM advertises the fact that they 14 contributed this. We have produced those files in discovery 15 saying, We think you contributed. We know you contributed 16 NUMA and RCU. We think it's a violation. Now, whether it 17 is a violation or not is not of moment in this particular 18 hearing. That's something that we will argue about at a 19 different day and a different time. But, Your Honor, just 20 at least in support of the statements made by our 21 executives, that's what they have talked about is that IBM 22 has taken the Dynix code and wholesale contributed very 23 important parts of it relating to multiprocessor code, and 24 IBM has taken the methods learned and really improved the 25 multiprocessing capabilities of Linux in a way that violates 48 1 either the confidential information or some copyrighted 2 code. That's what we've been saying all along, and that's 3 consistent with what we continue to say. 4 So, I don't know if my 10 minutes are up, but 5 here's what I think, Your Honor, is the appropriate order 6 that we would request is entered, that we, in fact, take a 7 scalpel out, and we -- and, Your Honor, just for fun here, I 8 brought the last CD's produced by both sides in this 9 particular case of information. Ours is numbered 126 and 10 theirs is numbered 21. This morning we actually received 22 11 and 23, as I understand it. Which is simply to say we've 12 produced a hundred more CD's of documents than they have. 13 What we want and what we need is all versions of AIX, all 14 versions of Dynix. We have repeatedly asked for it since 15 June. We have not seen one line of any of that until, 16 apparently, this morning two CD's of a version of Dynix were 17 produced. So the appropriate order, Your Honor, is simply 18 this, that first of all, IBM produces all of the Dynix and 19 AIX, and we then compare it with our Unixware code to be 20 able to draw more concrete allegations, more concrete 21 answers to the interrogatories, and that once IBM has 22 produced its code so we can compare it, and we have 30 days 23 to do that, we'll take another crack at answering the 24 interrogatories in another fashion. But we just think 25 that's the fair way of doing this, and, Your Honor, to stop 49 1 discovery would be absolutely unjust in this case because 2 then, again, remember, the derivative works, we never saw 3 them in the first case. We're not saying they're trade 4 secret. We're saying IBM had a contractual obligation to 5 not disclose those, so it would tie our hands, absolutely 6 improperly, and give IBM strategic advantages that would be 7 not right in this case, as far as how discovery should 8 proceed. So that's our request in terms of how this ought 9 to be handled, Your Honor. 10 THE COURT: Thank you, Mr. McBride. 11 Mr. Marriott, anything in brief response? 12 MR. MARRIOTT: Sure, Your Honor. 13 Unless the Court wishes, I won't respond in full 14 to SCO's motion to compel IBM except, Your Honor, to say 15 this, IBM has produced what amounts to the equivalent of 16 more than a million pages of paper. We have not refused to 17 provide discovery. We have said the discovery must be 18 tailored to the allegations in the complaint. We've 19 provided the discovery that we think can fairly be provided 20 in view of their allegations. We have provided Dynix code 21 as of last night. We would have provided it earlier, Your 22 Honor, but for the third party notice process that's 23 required. We intend to provide AIX code to them. We intend 24 to provide the code when the process of third party 25 notification is compete. 50 1 What we don't intend to do, unless this Court 2 makes us do it, is to produce every conceivable iteration 3 and version of AIX and Dynix. As we lay out in our papers, 4 that amounts to somewhere in the order of 40 million pages 5 of paper. There's no cause for that. It bears no relevance 6 to the case as we presently know it. And we would 7 respectfully ask that the Court adhere to its tentative 8 rulings, grant IBM's motions in their entirety and either 9 deny or hold in abeyance the SCO motion. 10 Thank you, Your Honor. 11 MR. MCBRIDE: One very brief sur-reply, Your 12 Honor? We want the 40 million pages. We'll digest it. 13 THE COURT: Are you yourself going to review them 14 by Sunday, Mr. McBride? 15 MR. MCBRIDE: Your Honor, if we have it in 16 computer readable form, our experts can analyze it. Unless 17 we have it from IBM, we can never know the ways they've 18 improperly taken their derivative work code and made Unix 19 better in violation of our contract. That would be an 20 injustice, Your Honor. 21 MR. MARRIOTT: May I just -- 22 THE COURT: Last word. 23 MR. MARRIOTT: -- respond briefly to that one, 24 Your Honor? If you take a look at the little book that we 25 provided Your Honor of the Linux development process, what 51 1 makes this -- independent of the fact that there are no case 2 -- there is no case law authority for what Mr. McBride 3 suggests, independent of that, if you take a look, Your 4 Honor, at the chart, you will see that the Linux development 5 process is an open process. That's what makes Linux great. 6 It Mr. McBride and any of the SCO executives want to know 7 what anybody's contributed to the Linux operating system, 8 they can find it out for themselves by getting on the 9 internet at any one of the number of sites that exist there 10 and doing a search for IBM. 11 Thank you, Your Honor. 12 THE COURT: Counsel, I am ready to rule in this 13 matter. I think it is essential to get the ball rolling in 14 this circumstance, and I'm convinced that my initial 15 intended order is appropriate in this case. And I say that, 16 acknowledging, Mr. McBride, that at the conclusion of what 17 will be required of SCO, then we will visit your issues to 18 determine the breadth and specificity that will be allowed 19 you. We're going to do this both ways. 20 At this time, however, I will grant defendant 21 IBM's motion to compel answers to both sets of 22 interrogatories, and that would include, I think, 12 and 13, 23 if those are the ones that are questionable. SCO is to file 24 its responses within 30 days of the entry of this order, and 25 if, for some reason, it is in good faith unable to obtain a 52 1 particular portion of that, then it must file the 2 appropriate affidavits indicating why it cannot. It is to 3 respond -- it should file its discovery and respond in order 4 to comport with the -- or correct the deficiencies that are 5 set forth in the defendant's addendum that's filed November 6 the 4th. 7 Mr. Marriott, I would ask you, if you are able to 8 at this time, to identify those particular documents which 9 you are requesting. Are you able to do that? 10 MR. MARRIOTT: I can begin that, sure, Your Honor. 11 THE COURT: All right, let me just indicate 12 further that those responses are to identify, with 13 specificity, the source codes that you are claiming form the 14 basis for your action. 15 Now, with regard to the documents. 16 MR. MARRIOTT: Your Honor, I'm happy to, by way of 17 supplement, to provide a full list. We have a number of 18 document requests, somewhere in the order of 50. Of course, 19 we want answers to all of those. The principal problem here 20 has not been that SCO has objected to providing them. It's 21 said that it would provide them, but it simply hasn't done 22 it. We think that the process is being gamed in the sense 23 that we're told, Well, we're in a rolling production. 24 You'll get them eventually. We know there are important 25 documents that are missing, and let me try to itemize them 53 1 for the Court, if I may, some of those. 2 MR. MCBRIDE: Do you have a list? 3 THE COURT: I don't want to take -- perhaps if 4 they're in written form, you can provide that to Mr. McBride 5 and -- 6 MR. MARRIOTT: I'm happy to do that, Your Honor. 7 THE COURT: -- the same requirement will be 8 enforced. In the meantime, all other discovery is 9 postponed. And the -- you -- both parties will be expected 10 to abide by the protective order that is currently in place. 11 I will set this matter for a hearing. 12 Mr. Marriott, I would ask that you prepare the 13 order in this matter and submit it to me no later than 14 Wednesday of next week. Assuming that it is an appropriate 15 order, then your 30 days would begin to run, Mr. McBride, 16 from that period of time. We will set a hearing, then, for 17 approximately two weeks thereafter, so we are talking about 18 the middle of January, all right. Does anybody have a 19 period of time, let's say, in the week of January 12th when 20 you could not be present for a morning hearing? 21 MR. MARRIOTT: No, Your Honor. 22 THE COURT: All right. Does that give you 23 sufficient time? I am holding you to the 30 days, but if we 24 get this order signed by Wednesday of next week, let's make 25 it even the fourth week of January, which is after the 54 1 19th. Why don't we do it Friday, then, the 23rd at 10 2 o'clock, again, and then we will address the remaining 3 motions of SCO, all right. 4 MR. MCBRIDE: So Your Honor is not ruling on our 5 motions at this point in time; is that correct? 6 THE COURT: No. I'm not ruling on your motions, 7 and that is inherent in my order that further discovery be 8 postponed. 9 MR. MCBRIDE: Very good, Your Honor. 10 THE COURT: We'll address them then. 11 MR. MCBRIDE: So and we'll, in this next -- the 12 January hearing then we will address the -- our pending 13 motions as well? 14 THE COURT: Yes. 15 MR. MCBRIDE: Thank you, Your Honor. 16 THE COURT: All right. That's with the assumption 17 that the discovery that SCO is to complete has been 18 completed, all right, and with the required specificity. So 19 what my intention is, then, is to then address the motions 20 of SCO. 21 MR. MCBRIDE: Just -- I'm just thinking 22 procedurally whether we will have time to actually brief and 23 agree upon whether we -- the specificity is required in 24 advance of the hearing or whether we will be doing that at 25 the hearing. 55 1 THE COURT: No. I would think that should be in 2 place prior to the hearing. If you want a date later than 3 that, that's fine. I don't care. 4 MR. MCBRIDE: Let's hold that date for the time 5 being, and then if, for whatever reason, it appears 6 problematic, we'll notify the Court Does that seem 7 appropriate? 8 THE COURT: It does. 9 MR. MARRIOTT: That's fine by us, Your Honor. 10 THE COURT: If there's nothing further, counsel, 11 we'll be in recess in this matter. 12 (Whereupon, the hearing was concluded.) 13 14 * * * 15 16 17 18 19 20 21 22 23 24 25 56 STATE OF UTAH ) ) ss COUNTY OF SALT LAKE ) I, Dawn E. Brunner-Hahn, Redistered Professional Reporter, within and for the county of Salt Lake, State of Utah do hereby certify: That the foregoing proceedings were taken before me at the time and place set forth herein, and were taken down by me in shorthand and thereafter transcribed into typewriting under my direction and supervision; That the foregoing pages contain a true and correct transcription of my said shorthad notes so taken. In Witness Whereof, I have subscribed my name this 9th day of December, 2003. [signed Dawn E. Brunner-Hahn, RPR] ------------------------------- DAWN E. BRUNNER-HAHN REGISTERED PROFESSIONAL REPORTER 57 [$Id: IBM-88-transcript.txt,v 1.1 2004/08/10 11:35:13 al Exp $ This is the ASCII transcription posted at scofacts.org. ]